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Five Reasons Why Grocery-Anchored and Neighborhood Retail Could Be a Smart Addition to Your Portfolio

5/2/2025

In a market defined by volatility and shifting consumer habits, it’s easy to overlook the quiet strength of grocery-anchored and neighborhood retail centers. Yet these assets continue to demonstrate durability, relevance, and performance, often without the headlines. For investors seeking stable income and long-term value, this corner of commercial real estate offers compelling reasons for a closer look.

1.  Essential by Nature

Grocery stores are among the most consistent foot traffic drivers in retail, and they’re not going anywhere. Paired with complementary tenants like pharmacies, quick-serve restaurants, and personal care services, these centers cater to daily needs that are difficult to replace or disrupt.

  • In 2024, foot traffic in grocery stores rebounded, surpassing pre-pandemic levels with a 5.9% increase from 2019. Discount grocers like Aldi and Grocery Outlet saw significant increases, with foot traffic up 51.2% and 48.7%, respectively.i

When your tenant mix reflects what people do every day, such as eating, shopping, picking up prescriptions, you’re not betting on trends. You’re investing in habits.

2.  Built-in Resilience

During economic downturns, grocery-anchored centers have historically outperformed other retail formats. Even in periods of reduced consumer spending, foot traffic remains stable, and rent collections tend to hold up, especially when anchored by credit tenants with necessity-driven offerings.

  • According to a recent report by JLL, grocery-anchored retail was one of the few retail categories to maintain positive net absorption in 2024, totaling nearly 300,000 square feet. This resilience is attributed to the essential nature of grocery shopping and the consistent demand for daily necessities.ii   Read the full report here.

3.  Sticky Tenants, Sticky Income

Many of these centers house tenants with long lease terms and high renewal rates. Local businesses also value proximity to the grocer, helping maintain occupancy even as markets fluctuate. This stickiness contributes to more predictable, inflation-hedged income for investors. 

  • In 2024, our Core Plus Fund stabilized retail portfolio maintained an average occupancy rate of 99.3%.iii

Explore Core Plus Fund here.

 

4.  Strong Demand, Limited New Supply

Construction costs and zoning constraints continue to limit new retail development, especially in dense urban or suburban cores. That scarcity supports rent growth, even as the broader market resets.

  • In many markets, neighborhood centers are among the few remaining retail formats with pricing power. In 2024, grocery-anchored retail rents experienced a 3.7% year-over-year increase, surpassing other retail subtypes such as strip centers (3.6%), power centers (3.3%), and malls (3.0%).i, ii

 

 

5.  Community Connection

These centers are often situated within residential neighborhoods, making them easily accessible and fostering a sense of familiarity among shoppers. This proximity encourages repeat visits and strengthens the bond between the center and the community it serves.

  • Grocery stores have continued to see a steady rise in foot traffic, with industry foot traffic for groceries up nearly 11% in 2024, indicating sustained customer engagement.i

In times of economic noise, it’s worth paying attention to the quiet performers. Grocery-anchored and neighborhood retail centers may not dominate the headlines, but they’ve quietly earned their place as a core component in a balanced real estate portfolio.

 

Grocery-anchored retail is a strategic component of our Core Plus Fund, seeking stable cash flow and strong risk-adjusted returns in a volatile market.

Explore Core Plus Fund here.

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This communication is intended for informational purposes only. It does not constitute an offer to sell or a solicitation of an offer to buy any securities. Any offer will be made only through definitive offering documents and in accordance with applicable securities laws. Past performance is not indicative of future results, and all investments carry risk, including the potential loss of principal.

i.   Source: GlobeSt.com Grocery Retail Vacancy Hits Record Low as Demand for Space Rises March 2025

ii.  Source: JLL.ca Grocery Report 2025 Grocery-anchored retail thrives with healthy tenant and robust investor appetite February 2025

iii.  Based on gross leasable area (GLA). Reflects the average of quarterly occupancy rates: 99.6% (Q1), 98.9% (Q2), 98.9% (Q3), and 99.6% (Q4).